Affiliate Marketing: 8 Simple Ways to Fix Your Cashflow Problem
“Money is my military, each dollar a soldier. I never send my money into battle unprepared and undefended. I send it to conquer and take currency prisoner and bring it back to me. ” Kevin Oleary
“No money, no honey” – T-shirts in Bangkok
I thought I was on top of the world when I hit my first profitable campaign. I put $100 into Facebook, and I made $300 revenue. That’s 200% ROI!
I thought I found a hack in the matrix – how many stocks do you know can do 200% ROI daily?
Once you hit a winner then it’s time to SCALE. I upped my budget and was ready to CRUSH it.
But a week later I had to pause everything.
- It wasn’t because I got kicked off the offer.
- It wasn’t because competition became fierce.
It’s because I ran out of money. My debit card was going close to $0, and my credit card at the time only had a $1000 credit limit.
Reality hit – I had a cashflow problem.
The network wouldn’t pay me out for another month. I talked to them and eventually got on weeklies, but even then it’d take another 2 – 3 weeks before the first wire would hit.
I had to pause my traffic and plan my next move.
What Is Cash Flow?
Cash flow is the ACTUAL money coming in and out of your business.
Note: This is NOT what your Voluum account tells you.
A tracker shows your daily profits and losses, but it is only part of the equation.
There is a time mismatch in affiliate marketing – the traffic source wants to be paid NOW, but the affiliate network wants to pay you LATER.
Also, your tracker doesn’t take EVERYTHING into account (unless you’ve got some seriously customized solution).
What other expenses does the average affiliate have that want paid NOW?
- Spy tools
- Subscriptions (forums, newsletters etc)
- Traffic actual (tracker is a close estimate)
- Software (Photoshop etc)
- Outsourcing (translations, coding, design)
- Bank fees and currency conversions
The goal is to make your campaigns profitable so that they cover all of these expenses, but so many people make the mistake of just looking at their tracker as a snapshot of their business.
Protip: Lets assume you make $5k profit in your tracker. Don’t be a dummy and think you made $5k profit.
Account for taxes. Paying your staff. Overhead. That $5k profit could end up being close to $2,000.
By the way, what businesses in the world measure their success by how much they make on a daily basis?
An example of cash flows could be this:
01 June 2016 you deposit $1,200 into your traffic source and spend it over the next week.
01 July 2016 you receive $1,500 from your affiliate network.
An example of the profit and loss in a tracker would look like this:
$1,200 in expenses
$1,500 in revenue
This gives you a 25% ROI for the month.
However your actual expenses are probably more than $1,200, AND you are receiving and paying amounts at different times.
That is the difference between cash flow and tracker daily profit and loss statements.
How To Improve Cash Flow For Your Business
You don’t wanna end up in a situation where you have a profitable campaign, but you can’t fund it.
And you don’t wanna have a situation where there’s a great business opportunity, but your money’s tied up in a house or a new car.
1. Increase Payment Frequency
Most affiliate networks pay once a month by default (via a check). In general they don’t wanna pay you faster because they’re taking a risk. Put yourself in their position.
You send them $20,000 worth of traffic and they pay you out weekly from their funds.
They don’t get paid $20,000 from the advertiser until a month later.
What if the advertiser says, “This $20,000 affiliate A sent is fraud traffic or misleading traffic. We’re not gonna pay.”
Now the affiliate network lost out on that $20,000.
That’s why affiliate networks have to do a little “risk management” on their end. Everyone thinks of networks as the place to find hot offer, but they also serve as a bank.
I would say most networks require a minimum $1,000 a week in revenue before you can get weekly wires.
Here are some tips.
1. Stay loyal to one network in the beginning. If $1,000 is the minimum for weeklies then it can be hard to hit it if you’re sending $250 to 4 different networks.
2. Build the relationship. That’s why it’s so important to go to conferences. Once they see you in person they trust you more. You’re less likely to screw them over.
3. Networks can make exceptions. Are you only generating $500 a week? Talk to them.
“Hey affiliate manager. I’m having some cashflow problems with my campaign. Right now I’m profitable, but I can’t keep the campaign going due to cashflow issues. If I could start getting paid weekly I can increase my revenue to $2,000 a week after a month. And if you do me this favor, I’ll keep the traffic with you guys”
Protip: Whenever you ask for a favor, always show how it can benefit them. They don’t care if you’re running out of cash. But re-frame it to show you’ll send more volume, and you’ll stay loyal.
You want a win / win situation for everyone.
Protip: If you’re doing monster volume…then daily payments are possible. The benefits of daily payment isn’t just the cash flow, but it’s knowing the money’s in your bank and not in the network.
2. Use credit cards
One word of advice first – DON’T use credit cards to try and figure out affiliate marketing.
Using debt to fund affiliate marketing campaigns is one of the stupidest things you could do. When you’re spending money you don’t have then you get overly emotional. You won’t be able to make logical decisions.
How should you use credit cards?
Firstly, apply for one BEFORE you need it. You should have credit cards for emergency funds anyway. Some campaigns only last a week or so, but they can be hugely profitable in that week. A credit card might take a week to get processed and arrive, so if you haven’t got a credit card, get one today.
Secondly, use it to pay for traffic IF you have a profitable campaign and no other source of funding. You want to be 100% sure you’re gonna get paid by the network, so make sure your campaigns meet the creative guidelines.
As soon as you get your wire from the company, pay back your credit card, and start to build a war chest of cash.
My favorite credit cards:
AMEX Gold (this card gives 3x points on advertising spend up to $100k. You gotta select the category)
Chase Ink (for where American Express isn’t accepted)
Getting my AMEX Plum was a complete game-changer for me.
I could charge over a million dollars a month in spend, and I was getting paid on a weekly basis by the network.
Tip: Points > Cashback by a large margin. The rewards aren’t taxed like cashback is.
3. Borrow Money
This is the last resort, but borrowing and lending is part of business. People have different views on borrowing from friends and family, so I’m not going to tell you what to do.
Look at the risk-reward scenario and make a decision about who to borrow from. If the affiliate network stiffs you and you’ve borrowed $10k from mom and dad – how long will that take to pay them back?
Would you rather be in debt to your parents, a friend, a bank, a business partner etc.
If you ever borrow money from someone, make it your life duty to pay them back. Don’t be a fucking bum.
I’ve seen people owe money to others. And instead of paying them back, they somehow have the money to go on trips and buy new gadgets.
Your reputation is everything. Once again, don’t be a fucking bum.
4. Watch where your money’s stored
Do you know how much money you have stored in each traffic source?
I’ve had situations before where I deposited a few thousand bucks into a traffic source, and well I never ended up launching the campaign.
Months later I’d remember but it’s become a pain in the ass to recover it. Either my contact changed jobs, and there’s been situations before where the traffic source shut down!
Or you deposit $5,000, and realize the source sucks after a few hundred bucks. Are you taking the cash out immediately or do you forget about it?
Make sure you document where you have cash stored. $500 here, $1000 there, etc. adds up.
If you don’t see yourself using the traffic source within the next 2 months, then immediately ask for a refund.
I know some of guys are thinking, how could someone forget $1,000+? Well when you’re in the zone and wires are flying in from everywhere, things slip through the cracks.
Just create a system an assign it to a team member. Create a spreadsheet with each traffic source, and they log in once a week to update the $ in it.
5. Increase your personal cash flow
Increasing your income and decreasing expenses is a cliche, but that’s because it’s true. When I started affiliate marketing I was writing articles for $15 each. I also cooked at home, didn’t go out clubbing, and kept my expenses low. That meant more clicks for me and more data.
It sucks to be a penny pincher, especially if you’re used to nice lunches, bottles and travel, but that’s the tradeoff. Would you rather work hard and hunker down for six months and then emerge rich, or continue to be average for your whole life?
6. Document everything
Excel spreadsheets = control.
Every single day, week, month, quarter and year I have spreadsheets made up that document profits, losses, cash flow, projections etc.
Do you know how much you made or lost in March 2016?
Do you know what your ongoing fixed monthly expenses are?
What is your cash balance?
What is your current credit limit?
Excel (or Numbers if you’re on Mac and don’t have Office) has built-in templates that are more than enough to document your income and expenses.
Right now I use Xero.com to keep track of my accounting.
I check my $ daily so there are no surprises.
And I have an hour phone call with my accounting at the end of each month.
7. Build systems for income and expenses
Here are some actions I’ve taken that have been a major help:
- Get a business account ASAP for all business expenses and revenue – combining your personal account with business is a recipe for disaster.
- Don’t wait till year end to do this. Ideally, you will do daily profit and loss statements in Excel, but weekly and monthly are also necessary to check ongoing progress.
- Save all of your invoices to a single folder. Categorize them and have naming conventions.
- Know the dates you are due to get wires from companies, then have alerts to check your bank account on those dates. Send an email if the payment is late – this is your money. Don’t take any chances.
- Let your bank know that you do business overseas if you’re not from the US – you don’t want payments to be withheld due to restrictions.
- Keep everything on Dropbox or other cloud software (if you get audited and don’t have receipts, it’ll be a pain in the ass)
Accounting software is cheap, effective and necessary once you get to a certain level, but for newbies you can do it yourself. Plus, it’s good to enter things manually at the start as it really gets you thinking about your expenses and if you need them.
8. Build Your War Chest
You don’t want to reinvest absolutely all of your earnings. If something goes wrong with your campaigns or the network refuses to pay you, you don’t want to be stuck without any cash.
When he was starting Microsoft, Bill Gates made sure the company had a huge cash balance. He recommends at least one year operating expenses in the bank at all times.
Shit always happens and you don’t wanna be caught with your pants down.
Affiliate marketing can be a feast one month then a famine the next month. The up periods are great, but you’ve got to be prepared for the down periods. A cash buffer helps here.
Being in business is a constant battle – but the rewards make it worth it
What’s your relationship with cash?
My main goal with money is to use it to make me more money.
It boggles my mind when guys will take their hard earned profits, and immediately upgrade their lifestyle.
I love cars, vacations, and Louis Vuitton as much as the next guy, but they’re always going to be there. If you have an opportunity then you gotta strike the iron while it’s hot.
Don’t escape living “paycheck to paycheck” to end up living “campaign to campaign.” Treat affiliate marketing like a business, and managing your cash is an important part of it.
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